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American Apparel reports preliminary Q2 financial results
18 Aug '10
5 min read
The Company plans to work with the second lien lender to obtain the appropriate amendments prior to the anticipated covenant default; however, the Company can provide no assurances that it will be successful in securing such amendments or, if secured, the terms thereof. Noncompliance with covenants under the Company's second lien credit agreement constitutes an event of default under the Company's U.S. revolving credit facility, which if not waived, could block the Company from making borrowings under the revolving credit facility.
In addition, all indebtedness under the Company's U.S. revolving credit facility and the Company's second lien credit agreement could be declared immediately due and payable. There can be no assurance that if either or both of these events were to take place, that the Company would be able to obtain the additional sources of liquidity required to continue operations.
The Company expects to report a substantial loss from operations and negative cash flows from operating activities for the six months ended June 30, 2010. Based on this, and trends occurring in the Company's business after the second quarter and projected for the remainder of 2010, the Company may not have sufficient liquidity necessary to sustain operations for the next twelve months.
The Company's current operating plan indicates that losses from operations are expected to continue through at least the third quarter of 2010. These factors, among others, raise substantial doubt that the Company will be able to continue as a going concern. As disclosed in the Company's Quarterly Report on Form 10-Q for the Quarter ended March 31, 2010 (discussed below), the Company's management continues to develop a plan to improve the operating performance and the financial position of the Company, however there can be no assurance that management's plan will be successful.
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In addition, all indebtedness under the Company's U.S. revolving credit facility and the Company's second lien credit agreement could be declared immediately due and payable. There can be no assurance that if either or both of these events were to take place, that the Company would be able to obtain the additional sources of liquidity required to continue operations.
The Company expects to report a substantial loss from operations and negative cash flows from operating activities for the six months ended June 30, 2010. Based on this, and trends occurring in the Company's business after the second quarter and projected for the remainder of 2010, the Company may not have sufficient liquidity necessary to sustain operations for the next twelve months.
The Company's current operating plan indicates that losses from operations are expected to continue through at least the third quarter of 2010. These factors, among others, raise substantial doubt that the Company will be able to continue as a going concern. As disclosed in the Company's Quarterly Report on Form 10-Q for the Quarter ended March 31, 2010 (discussed below), the Company's management continues to develop a plan to improve the operating performance and the financial position of the Company, however there can be no assurance that management's plan will be successful.
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American Apparel Inc
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